Wealthy tenants at 22 River Houses being evicted as building converts to condo

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Update March 11, 2014- It seems that Big Real Estate will win in this dispute. The main vocal opposition, Seth Kyle, gave up and signed a lease in a FiDi apartment. When asked whether anyone else had organized and planned to fight, he replied, “Nope seems like a lost cause to be honest the Facebook group has no real leader and I was the most vocal….The Man wins.”.

March 6, 2014- By Steven E. Greer

Seth Kyle and his wife and kids have lived in the Battery Park City neighborhood since 1999. Since then, they have been forced to leave their apartment twice as their buildings have been converted from rental to condo (first at 225 Rector Place, then 333 Rector Place). He is now facing his third eviction from his current apartment in 22 River Terrace, as it too is converting to condo. He has lived at his current address for six years.

Mr. Kyle reached out to the local press this week to plead his case and prevent eviction. He now calls BPC home and does not want to move, yet again.

The Kyle’s have three children, and his three-year-old son was born in their current apartment. With Downtown school overcrowding such a problem, being located in one apartment for a long period of time is crucial for their chances of getting their son enrolled in the good schools located in BPC. The Kyle’s moved to BPC primarily for the schools, as do most parents in BPC.

The 324-unit building located in North BPC at 22 River Terrace was recently sold to Centurion Real Estate Partners for only $265 Million, in December of 2013. Centurion will attempt to convert the units into “owned” condominiums (nothing is “owned” in BPC since the Battery Park City Authority owns the land and leases all real estate to the developers, which is why the building was sold for only $265 Million).

When a rental building in New York City converts to condo, it is illegal to evict the renters for no good reason other than the desire of the building owner to make a profit by selling it as a condo. In New York Law N.Y. GBS. LAW § 352-eeee, it states, “No eviction proceedings will be commenced at any time against non-purchasing tenants for failure to purchase or any other reason applicable to expiration of tenancy.”. The State Attorney General also has made available this simplified handbook.

Part of the condo conversion law requires the building owner to issue a “red herring” letter to existing renters stating the terms of how the building will be converted. In the case of 22 River Terrace, Mr. Kyle claims that building quietly tricked one renter at a  time into signing into their leases a contract that allows them to be evicted. Much like a wolf pack that picks out the weakest of the herd of caribous in Alaska, the renters naive enough to sign this contract are now most likely to be evicted.

For the more savvy New York renters, such as Mr. Kyle who has been through three condo conversions, they are not so quick to give in. This week, more than nine renters in 22 River Terrace have formed a working group to fight back. No lawyers have yet been retained.

Mr. Kyle believes that the motivation for the new building owner, Centurion, for evicting market rate renters paying many thousand per month in rent (i.e. by no means rent stabilized freeloaders), is that they want to avoid the resale profits lost to the current renters who would be allowed to purchase at discounted “insider” prices. In the red herring letter, it estimates that if all of the new units are sold to outsiders, the revenue would be $490 Million, or a profit of $225 Million. If the current renters purchased, the revenue for Centurion would only be $416 Million, or $74 Million less in good ole greenback profit.

The “red herring” condo conversion plan still has a lengthy approval process by the State Attorney General to clear. Centurion claims leases expiring before the AG signs off on the plan are fair game for non-renewal, but the law seems to indicate otherwise.

According to Real Property Law 223b, non-renewal of leases in market rate or rent controlled units, for no good reason, is considered retaliation. Renters can not only prevent evictions, but also sue for damages.

The “gentrification” of neighborhoods is a common theme in New York City. Usually, rundown parts of Manhattan, occupied by low income artists and the like, are pushed out once the areas become trendy and the condos arrive. However, what is taking place in BPC is unique. With the arrival of Goldman Sachs headquarters and the world class shops at Brookfield Place, the wealthy BPC renter with an average income in excess of $150,000 are being dislocated by the “one percenter” millionaires.

Or will they?

The real estate market is on the waning phases of a long bubble created by the free-money era of the Ben Bernanke zero-interest rate polices at the Fed. Housing sales prices have already started to decline month-over-month as soon as the Fed began tapering the bond purchasing.

Are condo conversion real estate executives, such as the ones behind the 22 River Terrace, simply delusionally hoping that millionaires will magically show up and buy even though the gas is being let out of the bubble as we speak? Will projects like 22 River Terrace go bust just like 225 Rector Place did a few years ago?

If you are a renter being threatened with eviction, please post your comments below.